Are you looking for a way to improve your credit score? American Express has a new credit score simulator that may help.
Score Goals is a new service that’s available to both Amex cardholders and non-members at no charge. It is a part of the American Express MyCredit Guide initiative, which among other things, provides free access to your TransUnion credit score.
You may have seen the service advertised recently, or perhaps you’ve used a similar product like the credit score simulator from Credit Karma.
Money expert Clark Howard fully endorses the use of a credit score simulator, so we thought it was worth checking out.
“I think credit score simulators are fantastic,” Clark said. “Because people often misunderstand how credit scores work. The understanding of what makes one up, how you can raise it higher and the actions that make it go lower– well, those are at a ‘low F’ grade level for many.
“Even people who are interested in it don’t know how it works. And these more sophisticated simulators are now taking your own credit information and showing you what would happen.”
In this article, Team Clark has set out to quell some concerns about the new Amex simulator by signing up for the service and poking around to answer some questions you may have about the process.
What Is Score Goals?
Simply put, it’s a tool that helps you estimate the length of time and course of action needed to take your existing credit score to a desired new level.
This tool, which was created by TransUnion and is made available through MyCredit Guide on the American Express website, uses TransUnion VantageScore 3.0.
I won’t bore you with the specifics of how the VantageScore is assembled (read this link if you want them). But what you need to know is that its a predictive model for credit scores. It uses input for three of the major credit bureaus to better understand the lending risk of an applicant.
Knowing the “secret sauce” to that formula, TransUnion provides Score Goals to show what your score could look like in a given period. It’s based on projected behaviors that you input into the goals calculator. I’ll show you how to do this later in the article.
Note: Clark wanted me to remind you that the number you receive from TransUnion is one of many that can reflect your credit. Each of the three credit bureaus has a unique credit score based on your financial activities, and numbers that are meant to mimic them (like FICO score and VantageScore) are just another number in the mix. In other words, use Score Goals as a guide for good credit behavior, not as an exact prediction for what your score will be with a particular credit bureau.
What You Need to Know Before Getting Started
First, it’s important to remember that this tool is just that: a tool. It uses an approximated VantageScore based on a personal credit summary from information compiled by TransUnion.
The fine print makes it clear that Score Goals makes no guarantees that your credit score will actually change the way the simulator projects:
“The Simulator estimates how your score may change by varying one or more key variables. Your current score is displayed so that you can compare your current score to your simulated score. The Simulator does not guarantee that your actual score will reach the simulated score nor does it guarantee that you will be approved or rejected for credit by any financial institution; it just provides an approximate indication of your credit-worthiness. Change any or all of these variables to calculate an estimated change to your score.”
The summary used to provide your “current” credit score on the Score Goals dashboard weighs the following factors:
- Amount of open credit accounts
- Number of late payments
- Credit inquiries over the last two years
- Length of credit history
- Current balances
- Amount of unused credit available
These are some of the same factors that credit bureaus use to determine your actual credit score.
How to Sign Up for Score Goals
To access Score Goals, you must first sign up for the MyCredit Guide service from American Express. Again, this is free to both cardmembers and people who don’t have an Amex credit card.
As an American Express cardholder, I found that most of the work involved with the signup process was already done for me. Since my pertinent information was already on file, all I had to do was log in using my existing username and password. Once successfully logged in, I simply had to agree to the terms of service and I was on my way.
As you can see in the screenshot below, there is slightly more work for users who don’t have an Amex account. You’ll be prompted to provide your name and email address to set up the account, and then prompted to give more sensitive information so that your free credit score can be retrieved.
It is worth noting the disclaimer at the bottom of the signup screen that says you’re opting into allowing Amex to market to you based on your personal information. After all, there is no such thing as a free lunch.
How to Use the Score Goals Credit Score Simulator
Once I got logged in to Score Goals, I was shown my current VantageScore. I was then prompted to set a goal for my future credit score.
Step 1: Set Your Goal
Once you get your VantageScore, you’ll be prompted to set a goal for your future credit score.
For the purposes of the exercise, you must first decide between a 6, 12, 18 or 24-month term for growing your score. Then, you slide the scale to your desired score as pictured in the following screenshot:
For this exercise, I have chosen a goal of growing the score by 26 points (from 809 to 835) in two years.
Step 2: Assess Your Advice
Once you have set your score goal and the timeframe in which you’d like to reach it, Score Goals delivers the specifics.
It gave me four areas of action for my goal of an 835 score within 24 months and broke them down by high, low and medium impact levels:
American Express offered a little more context on how it arrives at the recommendations in the fine print:
“We derive recommendations by looking at the percentage of users with a similar credit profile as you in the VantageScore study that actually reached the goal score you selected within a given timeframe.
We recommend a timeframe where the goal you’re trying to reach was achieved by a relatively high number of consumers with a credit profile similar to yours. For shorter timeframes this goal was achieved by a relatively low number of consumers with a credit profile similar to yours.”
Step 3: Tinker with the Simulator
American Express lets you personalize your model a step further by showing the potential impact of certain specific actions.
Do you want to know how buying a home or car could affect your score? Want to know what happens if you close a credit card account or miss a payment? These are all scenarios you can customize in the simulator and get a projected score based on your proposed actions.
You can also adjust for changes in your financial situation that could alter your score:
Once you make your adjustments in all the fields and hit submit, you’ll see the projected change to your credit score.
For example, I told it that I wanted to pay off the debt on all of my credit cards, and it estimated that would raise the credit score in this sample from 809 to 811.
I found this tool to be a really handy way to tinker with ideas on how you could improve (or hurt) your score based on the advice the simulator gave in Step 2.
If you’re looking to improve your credit score for an upcoming purchase, using a credit score simulator is an easy way to get an approximation of the work you have ahead of you.
But it’s important to view Score Goals through that lens. It’s a simulated score based on used-submitted variables. That’s the equivalent of an educated guess on what your credit score could look like if you follow through. There are too many moving variables in your real-life credit situation to consider it anything more than that.
But American Express offers this tool free of charge, which makes it hard to complain.
My advice is to take advantage of all the free information available to you on your credit score, but don’t use the Score Goals tool as your only guide if you’re trying to improve your credit. Instead, consider it one of many exercises that can help you achieve your financial goals.